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Returns to Social Network Capital among Traders

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  • Marcel Fafchamps

    (Department of Economics, University of Oxford)

  • Bart Minten

    (Department of Agricultural and Environmental Economics, Katholiek Universiteit van Leuven)

Abstract

Using data on agricultural traders in Madagascar, this paper shows that social network capital has a large effect on firm productivity. Better connected traders have significantly larger sales and value added than less connected traders after controlling for physical and human inputs as well as for entrepreneur characteristics. The analysis indicates that three dimensions of social network capital should be distinguished: relationships with other traders, which among other things help firms economize on transactions costs; relationships with potential lenders; and family relationships, which reduce efficiency, possibly because of the blurring of firm boundaries. We find no evidence that social capital favors collusion.

Suggested Citation

  • Marcel Fafchamps & Bart Minten, 2000. "Returns to Social Network Capital among Traders," Development Working Papers 145, Centro Studi Luca d'Agliano, University of Milano.
  • Handle: RePEc:csl:devewp:145
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